nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2020‒02‒17
six papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Dishonesty and Risk-Taking: Compliance Decisions of Individuals and Groups By Fochmann, Martin; Kocher, Martin G.; Müller, Nadja; Wolf, Nadja
  2. How Do Households Allocate Risk? By Christoph Engel; Alexandra Fedorets; Olga Gorelkina
  3. Capital income taxation under full loss offset provisions of a prospect theory investor By Hlouskova, Jaroslava; Tsigaris, Panagiotis
  4. Does exposure to violence affect reciprocity? Experimental evidence from the West Bank By Elisa Cavatorta; Daniel John Zizzo; Yousef Daoud
  5. Leadership in a Public Goods Experiment with Permanent and Temporary Members By Angelova, Vera; Güth, Werner; Kocher, Martin G.
  6. Preferences for observable information in a strategic setting: An experiment By Adam Zylbersztejn; Zakaria Babutsidze; Nobuyuki Hanaki

  1. By: Fochmann, Martin (Freie Universität Berlin and University of Cologne); Kocher, Martin G. (Institute for Advanced Studies, Vienna, University of Vienna, and University of Gothenburg); Müller, Nadja (University of Cologne); Wolf, Nadja (University of Hannover)
    Abstract: Unethical behavior in organizations is usually associated with the risk of negative consequences for the organization and for the involved managers if being detected. The existing experimental literature in economics has so far mainly focused on the analysis of unethical behavior in environments that involve no fines or similar monetary consequences. In the current paper, we use a tax compliance framework to study (un-)ethical behavior of individuals and small groups. Our results show that groups are clearly less compliant than individuals. The risk of being detected is the most important aspect in the group communication process when deciding on compliance.
    Keywords: Dishonesty, lying, compliance, risk-taking, group decisions, communication, norms, experiment
    JEL: C91 C92 D03 H26
    Date: 2019–08
  2. By: Christoph Engel; Alexandra Fedorets; Olga Gorelkina
    Abstract: Individuals often have to decide to which degree of risk they want to expose others, or how much risk to accept if their choice has an externality on third parties. One typical application is a household. We run an experiment in the German Socio-Economic Panel with two members from 494 households. Participants have a good estimate of each other’s risk preferences, even if not explicitly informed. They do not simply match this preference when deciding on behalf of the other household member, but shy away from exposing others to risk. We model the situation, and we find four distinct types of individuals, and two distinct types of households.
    Keywords: risk preference, household, reticence to expose others to risk, tradeoff between individual and foreign risk preference
    JEL: C45 D13 D81 D91
    Date: 2018–11
  3. By: Hlouskova, Jaroslava (Institute for Advanced Studies, Vienna, Austria and Thompson Rivers University, Kamloops,BC, Canada); Tsigaris, Panagiotis (Thompson Rivers University, Kamloops,BC, Canada)
    Abstract: In this paper we examine capital income taxation of a reference dependent sufficiently loss averse investor in a two period portfolio choice model under full loss offset provisions. Capital income taxation with loss offset provisions has been found to stimulate risk taking in expected utility models under certain assumptions about attitudes towards risk but would such effect be found under prospect theory type of preferences? We observe that the impact of capital income taxation depends on investors’ reference levels relative to their endowment income and thus we explore capital income taxation for different types of loss averse investors in terms of their ambition. We consider the less ambitious investors to be the ones with relatively low reference levels (they avoid relative losses in both periods) and more ambitious investors to be those with relatively high reference levels. We analyze two types of more ambitious investors: investors with higher time preference (who experience relative losses only in the second period under the bad state of nature) and investors with lower time preference (who experience relative losses only in the first period). We observe that capital income taxation stimulates current consumption in most cases which encourages risk taking, although the final outcome would depend on the investors’ degree of risk aversion, the rate of time preference and the tax rate in relation to certain thresholds. Current consumption could be discouraged for some ambitious type of investors that have relatively high second period reference levels but not necessary first period reference levels. In summary, to determine the impact of capital income taxation on the decision variables the reference levels in relation to endowment income play the most significant role. Ignoring reference depended preferences can lead to different conclusions for investors reaction to capital income taxation. We also find certain type of investors whose happiness level increases with capital income taxation under full loss offset provisions.
    Keywords: Prospect theory, loss aversion, consumption-savings decision, capital income tax
    JEL: G02 G11 H2 E20
    Date: 2020–01
  4. By: Elisa Cavatorta (Department of Political Economy, King's College London, United Kingdom); Daniel John Zizzo (School of Economics, University of Queensland); Yousef Daoud (Doha Institute for Graduate Studies and Birzeit University)
    Abstract: This paper studies how reciprocity is affected by exposure to political violence in early age. We combine a research design that isolates the exogenous exposure to violence with a lab-in-the-field experiment to study how reciprocity in the forms of conditional cooperation and vindictive behavior in adolescents varies as a result of exposure to violence. We focus on young Palestinians in the West Bank region of the Palestinian territories. We find that exposure to violence affects reciprocity of Palestinian adolescents: those more exposed to violence engage in more reciprocal behavior in both the domain of cooperation and that of aggression. Part of the effect is explained by changes in the beliefs about their peers' behavior.
    Keywords: reciprocity; cooperation; conflict; violence; Palestine.
    JEL: C72 C91 D91 I25
    Date: 2020–01–10
  5. By: Angelova, Vera (Technische Universität Berlin, Germany); Güth, Werner (Max-Planck-Institute for Research on Collective Goods, Bonn, Germany); Kocher, Martin G. (Institute for Advanced Studies, Vienna, University of Vienna, Austria and University of Gothenburg, Sweden)
    Abstract: We experimentally analyze leading by example in a public goods game with two permanent and two temporary group members. Our results show that leadership when permanent and temporary members interact leads to lower contributions than interaction without leadership.
    Keywords: Cooperation; leadership; social dilemma; public goods provision; experiment
    JEL: C91 D03 D64
    Date: 2019–11
  6. By: Adam Zylbersztejn (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Zakaria Babutsidze (SKEMA Business School - SKEMA Business School, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique, OFCE - OFCE - Sciences Po - Sciences Po); Nobuyuki Hanaki (Osaka University [Osaka])
    Abstract: We experimentally investigate how much value people put in observable information about others in strategic interactions. The incentivized experimental task is to predict an unknown target player's trustworthiness in an earlier hidden action game. In Experiment 1, we vary the source of information about the target player (neutral picture, neutral video, video containing strategic content). The observed prediction accuracy rates then serve as an empirical measure of the objective value of information. In Experiment 2, we elicit the subjective value of information using the standard stated preferences method ("willingness to accept"). While the elicited subjective values are ranked in the same manner as the objective ones, subjects attach value to information which does not help predict target behavior, and exaggerate the value of helpful information.
    Keywords: Prediction,observable information,individual characteristics,stated preferences,willingness to accept,experiment
    Date: 2019

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